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Alibaba – Who is responsible for keeping out the counterfeits?

Chinese e-commerce giant Alibaba is back in the news this week, but with less fanfare than its biggest-IPO-in-history success story back in September. It has been criticised in a report from the State Administration of Industry & Commerce (SAIC) over hosting the sale of counterfeits, among other illegal trading issues. Data from the SAIC suggests 63% of listed brand goods on the site are not genuine – no insignificant number to be sure. This has kicked-off a battle between the SAIC and Alibaba, with counter-statements from the company and a number of accounts of alleged infringements emerging from both sides.

This drama comes amid a well-publicised government drive to tackle infringements led by the cross departmental committee – the Office of the National Leading Group on the Fight Against Infringement and Counterfeiting, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), and the Ministry of Commerce (MofCom).

Most surprisingly, this criticism has been released right after Alibaba announced upgrades to its online IP protection systems that will come into operation on 1st April. This includes semi-automated procedures for notice-and-take-down systems and rapid response options for brands with good histories of reporting (with the opposite for those with poor histories). Though it is claimed that the report was deliberately delayed to avoid affecting the IPO price.

The claim that nearly two-thirds of branded goods on the site are fake is yet to be fully substantiated, with Alibaba strongly denying the claim. But we can ask is the platform doing enough to offer adequate protection and is this protection truly effective when fully-utilised?

Regardless of the quality of the Taoprotect system, a main issue for many foreign businesses is that they are simply not familiar with the protection and take-down procedure, as these online processes differ on other platforms, such as eBay’s VeRO. This form of online protection and enforcement also entails a regular search and monitoring strategy, which many businesses do not plan for.

Another fundamental problem is that many foreign companies have simply not yet registered their IP in China, meaning that they cannot initiate any take-down procedure on Alibaba and moreover leave their property at risk of being registered by others. This is particularly problematic for patents, which can take upwards of 1 year to grant (see the case of Vogmask). Thus, registering early is of the highest priority.

In our experience, dealing with European businesses on a daily basis, the vast majority of companies have no major problems on these platforms, so long as they have familiarised themselves with the Aliprotect/Taoprotect procedure. Even for those without full protection or with pending rights, updating the design of their products can be enough to keep customers satisfied with the real thing rather than turning to a cheaper knock-off.

This hints at an important point to remember – that a large and growing proportion of Chinese consumers want the genuine article not a fake, despite the difference in price. Consumers are more affluent and discerning than ever before, and want to display their real purchases and be assured of their safety and reliability, particularly when it comes to functional goods. If these platforms provide a trusted means to certify brands and products as the real deal, Chinese consumers do and will use them. This should at least inspire some confidence in European businesses thinking about entering China via the Internet, and reassure them that if they take the available steps to show the authenticity of the products they offer, while also monitoring for infringements, it will more often than not pay off.

For more detailed information on IPR protection on Chinese e-commerce platforms, see the Helpdesk Guide to E-Commerce here.

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Your IP Insider is the blog of the China and ASEAN IPR SME Helpdesks, two projects co-funded by the European Commission, which provide free information and services for European Small and Medium-sized Enterprises (SMEs) to both protect and enforce their intellectual property rights (IPR) in China and Southeast Asia respectively. Through contributions from experts within the field and the project team members, Your IP Insider discusses IPR developments in China and Southeast-Asia, and how these affect European companies. We provide practical information on how you can develop your business’ IP strategy with simple, cost-effective measures.

Disclaimer: The China IPR SME Helpdesk is a free service which provides practical, objective and factual information aimed to help European SMEs to understand business tools for developing IPR value and managing risk. The services are not of a legal or advisory nature and no responsibility is accepted for the results of any actions made on the basis of its services. Before taking specific actions in relation to IPR protection or enforcement all customers are advised to seek independent advice.